Unused Credit Cards Could Lower Your Credit Score

MIAMI (CBS4) – The economy has forced some people to stop using their credit cards as much as they used to and now some banks are reacting by canceling cards for customers who don’t use them. However, that can have a major impact on your overall credit score.

“My credit history with them was 12 years. Once they cancel my card, the system looks at your next card that you have open and that’s only 4 years,” explained Hicks.

Not only did closing his oldest card decrease his credit history, but with its 37-thousand dollar limit, closing it significantly impacted his debt to credit ratio.

Jacob Gibson from NerdWallet, a credit card comparison website, said the practice has become more common. “In the wake of the financial crisis over the last couple of years, they’ve been cutting credit across the board,” he said.

Gibson adds prior to the Credit Card Accountability Responsibility and Disclosure Act of 2009 or CARD Act, banks were allowed to charge for inactive accounts. But since banks are no longer able to charge, Gibson said banks are more reluctant to keep inactive accounts open.

“They are definitely in the business of penalizing inactivity,” he said. “They don’t want you to have one of their cards that you’re not going to use because they don’t make any money.”

One way to help your credit score, according to Gibson, is to charge small purchases from time to time in order to prevent long-standing credit cards from being closed.